Stocks and Trading Thread - Channeling your inner Mono

[Tamas]

Everything seems down right this week.
Lunar new year? Or the start of the collapse?

IDK but after the big runs lately this doesn't feel catastrophic just yet.

[Admiral Yi]

Vad Tenev and Keith Gill (aka Roaring Kitty) go to the same barber.

[Admiral Yi]

Anyone watch any of the Gamestop hearings?

https://www.youtube.com/watch?v=6HCkgjJFguo

AOC grilling Vlad.  Goofy, but not as goofy as I was hoping for.

[Habbaku]

I watched a lot of it, yeah. Waters grilling Vlad was the usual Congressional dumbassery. "Isn't it true that...?" style "questions" are insufferable.

[The Minsky Moment]

Anyone watch any of the Gamestop hearings?

https://www.youtube.com/watch?v=6HCkgjJFguo

AOC grilling Vlad.  Goofy, but not as goofy as I was hoping for.

Her questions seemed cogent but the format doesn't allow for a real substantive back-and-and forth.
Also someone needs to tell Vlad that just because 2 Beatles died doesn't mean there are plans to audition new members.  And even if that was the plan I doubt they'd go bac to the 1963 look.

[crazy canuck]

Anyone watch any of the Gamestop hearings?

https://www.youtube.com/watch?v=6HCkgjJFguo

AOC grilling Vlad.  Goofy, but not as goofy as I was hoping for.

Her questions seemed cogent but the format doesn't allow for a real substantive back-and-and forth.
Also someone needs to tell Vlad that just because 2 Beatles died doesn't mean there are plans to audition new members.  And even if that was the plan I doubt they'd go bac to the 1963 look.

Whether one agrees with her policy positions or not, she is always well prepared and asks informed questions.  Like getting him to explain why saying that his service had no fees wasnt just a bit misleading.

[Admiral Yi]

Her questions seemed cogent but the format doesn't allow for a real substantive back-and-and forth.
Also someone needs to tell Vlad that just because 2 Beatles died doesn't mean there are plans to audition new members.  And even if that was the plan I doubt they'd go bac to the 1963 look.

You say cogent, I say goofy. 

Her first question was a conclusion posing as a question, which, in her defense, is about the only type of question asked at Congressional hearings.  I'm referring to the question about the need to halt trading because of insufficient deposits at the central clearing house being a result of Robinhood's ineptitude.  What this means if all brokers would need to maintain an infinite deposit at the clearing house to avoid the charge of ineptitude.

She asked another question about returning payment for order flow to Robinhood customers.  That's the only revenue Robinhood derives from its "commission free trading."  She wants Robinhood (and presumably all retail brokers) to continue to process trades without revenue.  That's goofy.

I recently learned that other countries don't allow payment for order flow, which is why they still charge commissions for trades.  If you want to do it that way, more power to you.  But that is not the choice AOC's questions were getting at.  Her questions were about Robinhood is the bad guy, do it for free.

[crazy canuck]

Her questions seemed cogent but the format doesn't allow for a real substantive back-and-and forth.
Also someone needs to tell Vlad that just because 2 Beatles died doesn't mean there are plans to audition new members.  And even if that was the plan I doubt they'd go bac to the 1963 look.

You say cogent, I say goofy. 

Her first question was a conclusion posing as a question, which, in her defense, is about the only type of question asked at Congressional hearings.  I'm referring to the question about the need to halt trading because of insufficient deposits at the central clearing house being a result of Robinhood's ineptitude.  What this means if all brokers would need to maintain an infinite deposit at the clearing house to avoid the charge of ineptitude.

She asked another question about returning payment for order flow to Robinhood customers.  That's the only revenue Robinhood derives from its "commission free trading."  She wants Robinhood (and presumably all retail brokers) to continue to process trades without revenue.  That's goofy.

I recently learned that other countries don't allow payment for order flow, which is why they still charge commissions for trades.  If you want to do it that way, more power to you.  But that is not the choice AOC's questions were getting at.  Her questions were about Robinhood is the bad guy, do it for free.

Only if you are completely disingenuous.   Her point is that not disclosing there is a cost is misleading.

[The Minsky Moment]

I'm referring to the question about the need to halt trading because of insufficient deposits at the central clearing house being a result of Robinhood's ineptitude.  What this means if all brokers would need to maintain an infinite deposit at the clearing house to avoid the charge of ineptitude.

I may be giving her the benefit of the doubt but I didn't interpret the question that way.  I don't think she was suggesting they need to maintain infinite deposits - that would be pretty goofy.  I think she was suggesting that *given their business model* their reserves were insufficient.  I.e. if you market yourself to mass market day traders and encourage lots of trading and margin usage and if your business model is pushing rapid account growth, then you should be prepared for high volatility days with unusually high trading activity.  It is perfectly legitimate to inquire whether they carried sufficient capital to meet their obligations to maintain orderly operations for customers and what methods they used to determine appropriate capital levels.

She asked another question about returning payment for order flow to Robinhood customers.  That's the only revenue Robinhood derives from its "commission free trading."  She wants Robinhood (and presumably all retail brokers) to continue to process trades without revenue.  That's goofy.

Again I interpret it differently.  First there is a faulty premise - namely, that the only alternatives are transaction commissions or PFOF.  Not so - Fidelity charges zero commissions on stock trades and does not sell order flow on equities (they do PFOF on options).  Their strategy is to entice account holders to pay for pricey advice or retirement planning services. Admittedly their target customer is not likely a WSB stonk trader.

Second PFOF is a controversial practice for a reason.  If the order flow is taken off exchange as is common, there is no real guarantee of best execution, which means the customer could be paying nickels (poor execution pricing or larger buy-sell spreads) to save pennies (commissions).  To what extent is this true?  Hard to say because there is little insight into pricing where the market maker executes internally.  So this is an area of legitimate interest to Congress as regulator with relevant issues including: how does PFOF affect spreads and customer execution prices, to what extent are customers informed of the practice, and to what extent are customers properly informed of the potential tradeoffs.

What I found slightly goofy was the non-substantive response which basically says - yes we sell order flow and now everyone does it.  But that doesn't get to whether it is really a good deal for the customer or whether the customer understands what is going on.

[Admiral Yi]

Joan, when you said her questions were cogent, were you talking about the actual words that came out of her mouth, or what they might have been had you had a chance to rewrite them?

She contextualized her "question" about clearing house deposits by mentioning the crash Robinhood experienced a while back.  She was trying to paint a picture of ineptitude, not open a dialogue about sufficient reserves to maintain orderly processing.  Note that Robinhood has not had a problem up to now with clearing house deposits, even though their customer demographic has not changed AFAIK.

I'm aware of the issues around payment for order flow.  She raised none of them.  She asked if Robinhood was willing to pass them on to its customers.

[The Minsky Moment]

I guess my standards are lower . . . the fact that she identified relevant topic areas and didn't just condemn Wall Street out of hand seemed encouraging
I also don't expect people in Congress to ask proper questions.  Even if they had the ability to do it right, they don't have the time to conduct a proper cross-examination.  Plus they need to send a clean sound bite back home.

And I don't think its unfair to suggest the possibility of  ineptitude when a securities firm is forced to halt trading by their regular customers. 

[Admiral Yi]

Prior to the events of the last few weeks would you have said a reasonable, competent brokerage should have kept enough cash on hand to float coordinated, massive purchases that drove stock prices up 1,000%? 

[The Minsky Moment]

Extreme volatility events are pretty common on Wall Street.  Far more common than a normal statistical distribution would suggest.  So the answer is maybe.  I would want to know how they modeled their needs internally and what assumptions they made.

[Josquius]

I've been meaning to catch the highlights of this at least. Proved rather hard to find so far
Will try again this weekend.

Not so - Fidelity charges zero commissions on stock trades and does not sell order flow on equities

Is this a recent trade or only in US thing?
I tried using fidelity for a bit. Free for etf trades but stocks I avoided as they charge 10 quid a pop.
Also the interface is one of the worst things ever

[The Minsky Moment]

I didn't know Fidelity was even available outside the US.